Wednesday, April 12, 2006

Offshoring: The Next Industrial Revolution?

Foreign Affairs is the preeminent political science journal. Brad DeLong is pointing his students to an article there:
Foreign Affairs - Offshoring: The Next Industrial Revolution? - Alan S. Blinder

...Although there are no reliable national data, fragmentary studies indicate that well under a million service-sector jobs in the United States have been lost to offshoring to date. (A million seems impressive, but in the gigantic and rapidly churning U.S. labor market, a million jobs is less than two weeks' worth of normal gross job losses.) However, constant improvements in technology and global communications virtually guarantee that the future will bring much more offshoring of 'impersonal services' -- that is, services that can be delivered electronically over long distances with little or no degradation in quality.

That said, we should not view the coming wave of offshoring as an impending catastrophe. Nor should we try to stop it. The normal gains from trade mean that the world as a whole cannot lose from increases in productivity, and the United States and other industrial countries have not only weathered but also benefited from comparable changes in the past. But in order to do so again, the governments and societies of the developed world must face up to the massive, complex, and multifaceted challenges that offshoring will bring. National data systems, trade policies, educational systems, social welfare programs, and politics all must adapt to new realities. Unfortunately, none of this is happening now.
This theme has emerged in a few places recently. The direct impact of offshoring has been small to date, but the future impacts appear to be inevitably enormous. Even today the indirect impacts have been large -- computer science departments in the US are emptying out. Students are bailing not because of the current job situation, but rather because they correctly evaluate the future job situation. Unfortunately it's not clear what the better options are. Accounting? No. Law? No. Medicine? No. Industrial ontology? Uhh, no. Engineering? Surely you jest. Fast food clerk? No -- it's being outsourced and robotocized. Butler? Ignore the search results, look at the AdWords.

I'd love to read the rest of the article. Alas, it's payware. I'll look for postings that quote more extensively and link to what I find.

PS. It's not true that the world as a whole can't lose. That's only true if you assume continous functions. If the US or Europe convulses in widespread social disruption, then the world as a whole does lose. It's like flying a big jet. You win if you change your flight plans to a better destination, but if the required maneuver is too challenging the wings fall off.

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